July 27, 2017 Net Metering Filing: Updated October 2, 2017
Idaho Power recently filed a request to establish new customer classes for residential and small general service customers who choose to generate some or all of their own energy. Below are some additional details about net metering and potential changes, should this request be approved.
What is net metering?
Net metering is how customers who own solar panels, or other renewable sources of generation, offset their energy use by generating power on their property and connecting it to Idaho Power’s electrical grid. When customers generate more than they consume, the electric meter ‘spins’ backwards, providing a kilowatt-hour (kWh) credit for energy produced to offset energy consumed. Systems connected to the grid are referred to as ‘interconnected.’
How does net metering work?
Net metering customers install renewable sources of generation, like rooftop solar panels or small wind turbines, at their homes or businesses. Energy generated is consumed at the premise first, and any excess flows through the meter to Idaho Power’s lines. Excess energy produced is credited against energy consumption, and the customer is billed at the end of the month based on ‘net’ overall usage (kWh consumed minus kWh produced). The specific Idaho Power net metering policy is defined in Schedule 84, Customer Energy Production Net Metering Service.
What is Idaho Power requesting to change in the recent net metering filing for customer-owned on-site generation?
Idaho Power is requesting that the Idaho Public Utilities Commission issue an Order authorizing the company to:
- Close Schedule 84, Customer Energy Production Net Metering, to new service for residential and small general service customers and to establish two new classifications of customers for residential and small general service customers with on-site generation that interconnect to Idaho Power’s system. The two new customer classes will be Schedule 6 (Residential Service On-Site Generation) and Schedule 8 (Small General Service On-Site Generation).
- Require the installation and operation of smart inverters for all new customer-owned generator interconnections within 60 days following the adoption of an industry standard definition of smart inverters as defined by the Institute of Electrical and Electronic Engineers.
Lastly, the company is requesting that the Commission open a generic docket at the conclusion of this case with the purpose of establishing a compensation structure for customer-owned distributed energy resources (DER) that reflects both the benefits and costs that DER interconnection brings to the electric system.
Why does Idaho Power feel that now is the right time to review and consider modifying net metering service for residential and small general service customers?
Idaho Power has witnessed rapid growth in its net metering service in recent years. The company has identified and quantified that this growth is shifting costs from residential net metering customers to residential standard service customers (those without on-site generation).
Cost shifts occur due to the current rate structure for residential and small general service classes. Generally, the costs associated with serving residential and small general service customers is collected through a kilowatt-hour charge that covers a large portion of fixed costs to provide electricity to homes and properties. Fixed costs include the cost of power plants, lines, transformers and services that the company incurs and do not vary based on the amount of energy used by the customer. Similar to the transportation infrastructure and roadways that a majority of citizens rely on for travel, the electrical infrastructure is a necessary cost that is paid collectively by those using it.
As customers offset their monthly energy use through net metering, they reduce their total energy charge. The fixed costs they would normally pay as part of this energy charge are passed on to non-net metering customers in the form of higher rates. Without a change to how costs are collected from customers with on-site generation, future cost shifting between these customer groups will continue to increase as net metering grows.
Placing customers who install on-site generation into their own rate class is a first step to addressing this cost shift.
I've heard that it costs $65 to serve a residential customer each month, no matter how much energy they use. Is that true, and where does that number come from?
When serving customers, Idaho Power incurs two types of costs – fixed and variable. The fixed costs are related to things like maintaining meters, improving the grid, and services like billing. These costs are referred to as “fixed” because they don’t change based on how much power a customer uses. The second type is the cost of the energy itself, which is referred to as “variable” because it varies with a customer’s actual monthly power use.
The $65 is an approximation of all the monthly “fixed” costs Idaho Power incurs to serve a residential customer. However, that doesn’t mean customers are charged that amount on their bill each month. Currently, residential customers are charged a fixed $5 Service Charge that collects a portion of the fixed costs. The rest of the fixed costs and all of the variable costs are collected through the price per kilowatt-hour.
With this filing, Idaho Power has not proposed any pricing changes, including service charge changes, for customers with on-site renewable generation.
How will the company's filing impact existing net metering customers?
The proposal will not have an immediate impact on existing net metering customers. Under the company’s proposal, existing net metering customers will remain on Schedule 84.
How will the filing impact customers with current applications?
Under the company’s proposal, customers with an active application that submit a completed System Verification Form on or before the effective date of the new schedules will take service under the existing net metering schedule (Schedule 84). Customers with an active application who do not submit a completed System Verification Form on or before the effective date of the new schedules will take service under the new Schedules 6 or 8.
When is the effective date of the new schedules?
If the new schedules are approved, the effective date will be determined by the Commission as part of its ruling in the case.
Wasn't the effective date previously set for January 1, 2018?
Yes, when the company originally filed its request with the Commission, an effective date of January 1, 2018 was proposed. However, when the Commission established the schedule for the case, the January 1, 2018 effective date was suspended. If the new schedules are approved, the effective date will be determined by the Commission as part of its ruling in the case.
What constitutes as a complete System Verification Form?
The System Verification Form is part of the net metering application process. It is required to be submitted to Idaho Power after the system is installed and has passed the state or city electrical inspection. The form certifies that the system is complete and that all federal, state, and local requirements have been met. A completed system verification form will include all required information, including the date the system has passed the state or city electrical inspection.
Why are residential (and small general service) customers with on-site generation currently billed under the same rate structure as residential (and small general service) customers without on-site generation?
Schedule 84, Customer Energy Production Net Metering Service, was implemented in 2002. At that time, the company’s net metering service consisted of a single customer with an installed photovoltaic system. Under the terms of Schedule 84, residential (and small general service) customers would remain in the same customer class with the same rate structure as standard service customers (those without on-site generation) with the assumption that the cost shift would be small if participation levels were restricted. At that time, a capacity cap was set for net metering service at 2.9 megawatts. The capacity cap was removed in 2012.
Why is it necessary to have separate customer classes for residential and small general service customers who install on-site generation?
Customers are grouped into separate customer classes based on factors such as the nature of their use (home, street lighting, commercial, industrial, irrigation, etc.), the amount of electricity they need and when it’s used. Idaho Power then determines the cost to serve that customer group and sets rates for that class accordingly.
The establishment of customer classes has been a long-standing and important first step in the ratemaking process. By placing residential and small general service customers with on-site generation into their own customer classes, Idaho Power can then evaluate and propose an appropriate rate design and compensation structure.
What characteristics make a customer with on-site generation different than a customer without on-site generation?
The nature and pattern of energy use by residential and small general service customers with on-site generation is different than residential and small general service customers without on-site generation. Residential and small general service customers without on-site generation only consume energy from the grid, while residential and small general service customers with on-site generation consume energy from the grid and deliver excess energy to the grid. That is, the standard service customer has a one-way relationship with the grid while the customer with on-site generation has a two-way relationship. This two-way flow of energy is unique and fundamentally different than a customer without on-site generation.
Will new customers with on-site generation who take service under Schedules 6 or 8 have different prices than when they were taking service under Schedule 1 or 7, respectively?
Not at this time. The company is not proposing pricing changes in Schedules 6 or 8 as part of the 2017 filing. The pricing structures proposed in Schedules 6 and 8 will continue to mirror the prices in Schedules 1 and 7, respectively, until the Commission approves new prices for these customer segments in a future rate proceeding.
When does the company anticipate that it will request to modify the pricing structure in Schedules 6 and 8?
The company anticipates it will request to modify pricing as part of a future rate proceeding.
How are customers who install on-site generation different than a customer who installs an energy efficient product?
A customer with on-site generation and a customer who installs an energy efficiency product are similar in that they are both able to reduce the amount they are billed for energy; however, a customer who installs an energy efficient product is reducing their reliance on the grid (and lowering the cost to serve that customer) in every hour that product is called upon. That is, when the product is off, no energy to power it is required. When the product is being used, the energy efficient product uses less energy. Therefore, the customer’s overall energy needs are reduced.
On-site generation only reduces the energy needed in the hours when the system is generating. When the system is not generating, the grid is relied upon to serve the customer’s full energy needs. The installation of on-site generation does not result in an across the board reduction of use and reliance on the grid.
Why isn't Idaho Power considering segmenting large commercial, industrial or irrigation net metering customers into their own class and addressing their respective pricing?
The pricing structures for Idaho Power’s other customer classes are set up differently. These customer classes, including irrigation, large general service, and industrial, currently include a higher service charge and additional billing components (demand charge) designed to recover fixed costs. A small portion of the fixed costs to serve these customers is recovered through the variable energy charge. As a result, the cost shifting is less.
Other intra-class subsidies exist within the residential class and have for decades. Why are you singling out residential and small general service net metering customers?
Existing retail pricing structures were designed to collect the costs associated with the grid with the assumption that customers would only need one-way services provided solely by the utility. Overall, this pricing structure has worked for residential and small general service customers who receive one-way services from Idaho Power.
However, this pricing structure does not reflect the costs and benefits of the two-way transaction between Idaho Power and its customers with on-site generation. This growing segment of customers require services from Idaho Power, but also meets some of its own energy needs with on-site, customer-owned systems (e.g., rooftop solar). Many within this growing customer segment use the grid every hour of the month. However, with the existing pricing structure, customers with on-site generation are billed for their total use minus their total production. The resulting value may not reflect the full use of the system and may not be enough to cover the grid-related services they require.
Are other utilities facing this same situation?
Yes, many utilities across the country are dealing with this same issue. On-site generation adoption is growing, and the ways utilities recover costs must expand as well. Like many utilities, we are not opposed to renewable or solar energy. Those resources are an important part of the nation’s energy future. As Public Utilities Fortnightly reported, ‘Two important issues have been lost in the debate. First, there has to be a careful accounting of the true costs of the current policy and its impact on other customers. Second, it’s time to bring net metering in line with sound ratemaking and consumer-oriented policies.”